You want to make a more "original" investment than residential real estate. Why not turn to commercial premises? This is a booming sector that can offer great opportunities. If you take certain precautions beforehand, you can be sure to make a good deal.
Stores and boutiques of all kinds, offices, service activities, medical practices... In commercial areas or in the heart of cities. So many opportunities to seize if you want to diversify your assets and invest in a sector in the making. The market for commercial walls or store walls is still quite confidential, as it can be as profitable as, or even more profitable than, an investment in traditional real estate. Take advantage of the opportunities that arise and the benefits of this type of investment.
Being seen is the basis
As with the purchase of a home, the location will be of primary importance when choosing commercial premises. We can even say that it is strategic if you want a good profitability. A badly located establishment will not interest any tenants, few customers and will not generate enough income. The profitability will depend to 90% on the choice of this location. Prefer dynamic neighborhoods. Major arteries, busy streets, pedestrian areas and their adjacent streets, commercial areas, galleries of large surfaces... should be favored. With a bus or streetcar stop or a subway station in the immediate vicinity. Accessibility counts, as does ease of parking.
Finally, if possible, choose a location not far from a well-known brand that attracts customers. In turn, you will reap the benefits of their attractiveness. Also, be aware of "upcoming" neighborhoods that may offer good prospects in case of new developments, housing construction, public transportation... It's mathematical and unstoppable! The busier the area, the more consumers will increase your tenant's sales. This will be reflected in the rents received and will ensure the sustainability of your establishment and your investment.
What about taxes?
The commercial rents collected are taxed under the land income system. It is possible to deduct certain expenses to create land deficits, which can be deducted from the overall income within the limit of 10 700 € per year.
Free or occupied: it's your choice
Is it better to buy premises where your future tenant is already in place or to start from scratch? The purchase of "occupied" commercial premises has two major advantages. You won't have to worry about the rent to be charged and you can estimate the profitability as soon as you buy. Secondly, the tenant is already "in the place". So there is no risk of the premises being unoccupied. You benefit from a current commercial lease, which secures your project and facilitates your loan application. Secondly, your future tenant is known and has already built up a clientele. So many concerns and risks less. If you prefer to buy empty (which is often the case for a business located in a new building), you will have to estimate the rent by looking for information on comparable premises (location, surface area, condition of the property, professional sector, etc.) to ensure the potential profitability of the investment. You will also have to carefully choose the activity you want to carry out in the premises and find the ideal tenant.
A profitability of 6 to 8% if the location and the activity carried out are chosen with care
What capital outlay
Unlike housing, the prices of commercial premises are less subject to variations in real estate market prices. The most important parameter for a premises purchased bare is the profitability that it will generate. In other words, the price will depend on the rent and not on the price per m2. On the other hand, when one invests in a premise already occupied, one knows the amount of the rent, thus the return. It is therefore easier to buy at the right price and to project the profitability of the operation. In the purchase price, one must also take into account what is called "local marketing factors". These are the commercial environment that can influence the rental value, for example the creation of a parking lot or the development of a pedestrian zone. Where residential real estate is dependent on the tension between supply and demand in a targeted area, the commercial real estate market is linked to the profitability of your tenant's business, and therefore its ability to pay the rent.
And why not invest in an office?
Nurses, physiotherapists, accountants... are often looking for premises to practice their profession. By investing in offices, the return may be a little lower (between 5 and 6% per year), but in return, the lease will be for 6 years and the rent can be revised upwards each year.
A flexible lease
The lease you will sign has nothing to do with a residential lease. It is a commercial lease with its own rules. Much less "rigid", it is also more secure. It is for a period of 9 years with the possibility for the tenant to terminate it every 3 years (hence the name 3-6-9 lease). This guarantees the owner the presence of a tenant in the premises for long periods. The lessor and lessee have a great deal of freedom in drafting the commercial lease, particularly with regard to the distribution of charges. For example, the owner can ask his tenant to pay the property tax as well as most of the maintenance and development work. This is not possible in the case of a residential lease.
Unpaid rents are rare. And if by misfortune it should happen, you should know that the commercial lease is governed by corporate law.
The procedure for recovering the premises is therefore easier and quicker to set up than a notice of termination in the context of a classic lease. Moreover, there is no winter truce which prevents any eviction of tenants during the winter months.
Marie-Christine Ménoire